U.S. Treasury yields advanced Thursday as Brent crude climbed above $100.69 per barrel, renewing inflation fears. The 10-year yield rose over 4 basis points to 4.699%, hitting its highest since Jan. 15, 2025. The 2-year yield climbed over 5 basis points to 4.353%, while the 30-year yield reached 5.167%. Brent crude futures surged 7% following Houthi attacks on tankers and U.S. threats against Iran.

Fed funds futures now price in over an 80% chance of a September rate hike, up from 52% a week ago. Jobless claims fell to 187,000, below the 212,000 forecast. Chris Rupkey, FWDBONDS chief economist, warned the economy may be heating up but employment markets could face risks from Middle East escalation. He noted half of Fed officials are concerned enough about inflation to pencil in a rate hike this year.

Global yields also rose, with U.K. 10-year bonds climbing above 5.1% after new prime minister Andy Burnham cut property taxes on hospitality venues by 20%, costing roughly £100 million ($134 million). Investors await Friday's S&P Global Flash U.S. PMI report.